When you decide to start shopping for a new home, one of the first big decisions you need to make is whether or not you are going to work with a real estate agent throughout the home-buying process. If you do choose to enlist the help of an agent, you will be expected to sign a buyer’s agent agreement.
A buyer’s agent agreement is a contract that defines the working relationship between the buyer and the agent. It sets the expectations for each party by defining the responsibilities and obligations to which each will be held. The agreement essentially serves to prevent any problems from arising throughout the process that may derail the home search and purchase.
So what exactly is in such an agreement? That depends. Specification and language requirements will vary by state, broker, or agent, so there is no universal contract. There are, however, elements common to almost every buyer agent agreement.
This clause establishes that the home buyer will not work with any other agency or broker, at least until the term length of the contract is up. And, if you purchase a home within the time frame specified by the contract, you are obligated to pay that agent the commission rate agreed upon. That doesn’t mean you can’t request another real estate agent at the agency if you aren’t getting along, but you cannot leave the agency altogether. Essentially, you cannot work with two or more different agencies at once.
The Term Length of the Contract
The term length of the contract is the amount of time the contract is active. This is usually one of the first items spelled out in the first paragraph of the contract. It is negotiable and can be for weeks, months, or even years. Most contracts, however, last between 30 and 90 days.
The buyer’s agent agreement will stipulate the amount of compensation both the broker and the agent will earn from the sale. Again, like the term length, this is negotiable. Though, most of the time, the seller pays both the sellers and buyers agents’ commissions, the agreement specifies those terms and what you, as the buyer, will be responsible for should the seller breach the terms.
The Property Description
The agreement will also describe what you, the buyer, are looking for in terms of home size, neighborhood, type of property, price range, and other specifications for the purchase. This is not meant to cover every detail you want in your new home. It’s only meant to set expectations and keep you both on the same page in the home search. Technically, you are only bound to the contract for the property described in it.
Agreement Termination Rights
If either the agent or the home buyer wants to end the working relationship, this section outlines exactly how that should be done. It will address issues such as grounds for termination, how much money the agent should receive, how much notice must be given before the relationship is terminated, and any other issues related to termination rights. It’s an important part of the agreement for both parties.
Buyer’s agent agreements are meant to set expectations and protect the interests of both the agents and the home buyers. So, be sure to carefully read through the agreement and ensure you understand all elements before signing so you know exactly what to expect from your agent through the whole process.